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In todays letter: Yes, Tesla (211$) is still a zero, now with more (13.5bn) debt than before.

In any normal case, there would be zero left for shareholders, but, given events so far, Elon Musk must have friends in high places (although apparently not at T Rowe Price anymore, since Tesla's previously largest backer has sold its stake). Hence, first and foremost it will be interesting to see exactly how the reconstruction of Tesla will unfold.

What's truly sad is that Tesla could have been a force for good, but now it's damaging both its own brand value, and that of EVs in general. It should have filed for Chapter 11 long ago.---

So, the Tesla saga seems to be unravelling. Economically, the company's situation has looked untenable since it's very start. Tesla has never been able to post a profit (except for a few single quarters of very creative smoke and mirror efforts around important capital raisings). Now there are signs of financial troubles catching up with both Tesla and Elon Musk himself (margin calls).

Sure, he managed to raise nearly 3bn dollars for Tesla last week (mostly new debt), but recent news suggests that money is already gone. Actually, that was more or less a given from it's official Q1 net working capital numbers (which seemed stretched by about 2-3bn in the first quarter alone). In any case, a leaked internal memo has Musk telling his employees that Tesla must become cash flow positive within 10 months (probably means about half that), or perish.

That statement should ring some bells, considering Musk a few months ago claimed Tesla would be cash flow positive for every quarter going forward - only to post almost a billion dollar loss (adjusted for ZEV) in Q1, and apparently is on track for another big loss in Q2.

In addition, despite the huge cap raise, only days later Tesla launched a drastic cost cutting program. That's definitely not what one would expect from a company claiming to build "gigafactories" and new car models like the fabled "Y," pickup or semi.

Please note that when asked why Tesla is raising billions of dollars now, Musk's cool answer was something along the lines of "we actually don't need it, we don't expect to use it, it's just a buffer should a severe recession hit"

He who lands rockets

Tesla hasn't made any profits for 15 years, despite zero competition and maximum subsidies. Now both tides are turning, at the same time as Tesla is trying to transition from a niche luxury car maker to a cheap mass market car manufacturer with inherently lower gross margins. On top of it all Tesla has to start from the current level of huge annual losses and a debt of 13.5bn dollars, whereas its competitors have huge annual profits and cash flows to finance their EV entry.

Cars are now an appreciating asset, according to MuskThe equation just can't be solved, so what does "He who lands rockets and walks on Mars water" do? Of course, he promises a future only "12 months maybe, 18 months definitely" away, with a fleet of a million robotaxis each earning a yearly profit amounting to the price of a car. That's a hundred per cent return per year on your own car, and the profits are expected to accumulate over 11 years. Basically Elon's promise is: Buy a car for 30k and earn 300k net over its lifetime.

Some have asked if the insurance costs for a robotaxi driving around at night with only Level 2 autonomy* would be prohibitively high. The issue has become particularly relevant lately, after several spontaneous combustion and "autopilot*" accidents with Teslas involved. There's also anecdotal evidence of massive insurance premium raises for Tesla owners in California.

And walks on Mars water

Musk had an answer for that too: since he's already entrenched in the most competitive and notoriously loss-making industries he could find, he'll start a car insurance company as well! In a month. Not that Tesla has applied for a license or anything... But, hey, it's Elon we're talking about :D

(* since no car maker is anywhere near Level 5 according to industry experts, and when they do get there most are likely to arrive more or less simultaneously, thus leaving no room for Elon's fantasy 100% return per year numbers)

Oh, don't forget about "marginal" factors such as pedogate, which is moving closer to the courtrooms, and Elon's impending margin call(s). The further the share falls, the more he has to pledge or sell.

What would you pay for a company making 2-4bn in loss per year, that has 13.5bn in debt (trading at junk rates), and no cash over for capital investments to actually make the products it has promised (i.e., lied about), and whose main driving force is facing both margin calls and court? Yes, it's still a zero. Buy the bond (no recommendation!) if you think it'll survive at all

Gold, softs, small caps, hedge funds

Cutting to the chase, if I were a CFA I would recommend a portfolio with 10% in gold, 10% in soft commodities (agricultural products like wheat, corn, coffee, cacao, sugar etc.), 20% in a trusted global small cap fund, and 60% in a basket of different hedge fund strategies.

Disclaimer: Nothing on my site is to be construed as recommendations to buy or sell anything. All my writing is for educational and entertainment purposes, so be a responsible adult and consult a professional financial consultant before putting any money at risk, anywhere. Again: I don’t make recommendations. Never. Ever.

My own asset portfolio currently consists of an apartment, ten private companies, and various fixed income streams (loans and obligations). And precious metals.

I’m often asked what to invest in. It’s a hard question to answer. It depends on who’s asking, how much risk they can take, i.e., if they’ll freak out if they lose 5%, 10% or 50% in the interim, what their investment horizon is, and not least how active they will be.

There are several categories of answers, including the following:

Don’t invest at all. Just live it up as you get your hands on the money, or keep a buffer at the bank. The strategy is called: invest everything in your personal experience while you still have the time and energy.

Set aside a fixed amount every month and buy a global stock index for the money. Don’t look at the result for 40 years. Zero time and resources wasted.

Buy precious metals for 90% of your wealth. I’ll help you re-allocate when it’s time in a few years or so. Highly contrarian, zero income-generating, advice-contingent strategy.

The last bullet point warrants its own full text book, but I’ll try to break it down in just a few paragraphs.

Asset Allocation

First, some would advocate fixed weights for the various asset classes; 25% each if you choose four different pizza slices, 20% each if five and so on. I think you should be way blder than that. Risky assets like certain categories of listed stocks and private equity perform much better than the others during equity bull markets, as well as in total over time. Take advantage of that by on average allocating more than a “fair” share to equities.

Third, we are different, and thus there is no way you could invest the same way I do. I can make new assessments and investment calls every day if I’d like, and you don’t have access to information about when I change my mind.

When I describe a good portfolio allocation, I consider how I think the investor will manage the portfolio when I’m not looking, as well as how I think they’ll react to paper losses.

Fourth, as a general rule, over the very long term some kind of exposure to the general profit making part of growing economies is warranted. Ergo: over time most people should load up on stocks, perhaps even with a little leverage on average.

Leverage

I hesitated over that last statement, since most people aren’t equipped to decide when to use leverage, what kind of leverage and how much leverage. Consequently, most people use too much at precisely the wrong time and end up permanently destroying their capital.

That tragic historic fact aside, there are times to use smart leverage, and it’s right when the mentioned data series are near their lows. Unfortunately loans can be hard to get just when you want one, so you have to secure your loan earlier but hold off using the money until you get a fat enough pitch.

Alright, back to the portfolio allocation decision. This is what I told a friend earlier today:

10-20% gold

10-20% (soft, agri) commodities

20% global small caps managed by a trusted and experienced PM

40-60% a basket of various hedge funds with uncorrelated strategies

Why gold?

Gold and commodities are very cheap compared to stocks and the amount of currency in circulation, not to mention the vast quantities of outstanding credit and derivatives. In addition to all that government welfare promises require inflation or money printing of hitherto unheard of proportions.

If you own real stuff like gold, silver, uranium, real estate or a business, you only sell if the money you get in return will buy you some other real stuff you want in a reasonable quantity. When the amount of money in circulation doubles, you can expect prices on all tangibles to double too. Don’t sell for less, nobody else will.

Liqudity sloshing

So far mainly stocks have been on the receiving end, but the liquidity sloshing around the system is bound to reach metals and food sooner or later.

In any case, most governments have taken on more debt than they can handle with the current monetary system, and when they perform a re-set, it will most likely be against a basket of various moneys — including gold. It’s around that time, shortly after the re-set, a gold owner makes the switch from gold to stocks.

However, since you never know how far a bull market can go, or how far the madness of central bankers can push the system to avoid a crash on their watch, you’re more or less forced to hold some stocks at all times.

Right now, I advocate a minimum of stocks in relation to your average strategy, since we are within the 5% most expensive, euphoric, overbought and long-lived bull markets of all time. For some, like me, that means close to 0% listed stocks, or even outright net short stocks! In practice, however, I’m actually around 1% net long listed stocks. In addition, my private equity holdings amount to maybe 50% of my net worth, although it’s pretty hard to estimate their value at this point.

And then there is gold/silver, loans and real estate.

Well, that’s me. And you’re not me. Neither is my friend. I told him I like (Swedish) Robur’s global small cap fund that’s managed by Jens Barnevik. And as a basket of hedge funds I always mention Brummer Multi Strategy with 2x built-in leverage.

I have all my private pension money in BMS2xL, and I estimate that alone would be enough to carry me from retirement to the grave in a reasonably comfortable way.

However, that’s how things look now, when gold and commodities are cheap, P2P loans yield 7-10%, some corporate bonds even more, not to mention my private loans where the range is truly huge, and stocks are at their most expensive in 200 years right at the top of a record long expansion and the build-up of more leverage than ever at record-speed.

Algo-apocalypse or U-zombie

After what could either be an algo-apocalypse, a 75% crash in record time, or a drawn out, slow zombie death by a thousand cuts, U-formed profit recession, the tables will most likely have turned completely.

In the latter case, imagine impotent but vengeful central bankers spewing helicopter money over everone and everything they can shake a stick at, while companies fight tooth and nail to make their bond holders whole, and consequently having to cut back on investments, employees and growth. One company’s cutbacks and slow growth means less sales for another.

Thus the zombie disease of investment cutbacks spreads to the whole system. Nervous bond holders keep counting coupons and return of capital, while business owners constantly stare Chapter 11 in the face.

When stock market valuations have normalized, started to normalize, or possibly are going through a period of undershooting, it’s time to overweight equities, while underweighting all other asset classes. Maybe you should even go as far as consider going more than 100% long equities, if you have access to controlled and reliable financing and are dead sure of a secure line of income.

But which equities? Well, once again the Dogs Of Dow could be a place to look. Or stalwart cyclicals. Banks usually perform well after a (financial) crash. But beware of highly indebted companies, if I’m right that the downturn will be drawn out. Some of the latter might default given long time enough to recovery.

Too hard

If you realize this simply is too much work for you, perhaps somebody else should manage your money for you. Or you should aim for one of the simpler strategies.

That’s why I always come back to a portfolio of gold, fixed income, stocks and hedge funds.

Gold is your insurance against systemic risks and rampant inflation, and your source of purchase resources after a stack market crash. Fixed income takes care of your most urgent everyday needs. Stocks makes sure you get some of the upward drift of the world economy (although I really think everybody should try to at least perform some market timing, like buying much more after two negative years, or sell most when stocks are 100% more expensive than the historic average).

And finally, a basket of hedgefunds puts hundreds of brilliant absolute return focused asset managers to work, doing their best to create decent performance in both bull and bear markets in a wide range of uncorrelated asset classes. If you want risky assets-like performance but don’t want stock market crash-like downside, products like Brummer Multi Strategy (2xL) should form the basis of your portfolio.

Please note that I used to work at Brummer & Partners (2000-2014), but don’t have any affiliation with the group today. I just happen to like the product.

So, where did all of this put us?

Avoid stocks now and focus on gold, agri and a diversified basket of hedgefunds. Be prepared to allocate your money the other way around after a crash, but keep in mind it might be a U-shaped recovery that takes more than the usual 2 years before a clear uptrend is established. Look to Japan and some European indices for guidance. How should you best have played the Nikkei between 1990 and 2010?

Make sure you sleep well. The point of all wealth is well-being

Loans, including P2P loans, will probably be honored over time, which at the same time will be an important reason for the slow recovery. Size your exposure intelligently so you can sleep well at night when thinking about the individuals that might or might not be able to meet the payments due to you. Just don’t rely on them to provide ample liquidity when you want to go levered long the stock market in 2026. For that you’ll need gold.

"No", I thought, before I realized you were supposed to say "yes" and thus be enticed to read the book to find out why humans do things they can't explain or feel ashamed of. I just don't see it, why would you do thngs that shock yourself? Pull the trigger if you want to. Go to the gym if it's good for you. Party if you like, but don't do it if you feel bad afterward -- that is, bad-er than you expected.

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HOW DO YOU TRADE?

Talk about being shocked, some stock traders surprise themelves - and me - again and again, when they keep trading on emotional impulse during reporting season instead of according to set parameters within a proven strategy. If you were that guy or girl the last four weeks, don't be in April.

I hope this doesn't come as a shock to you, but since daytraders create exactly zero value (negative even, due to the false liquidity they provide, and the exaggerated price swings they cause as they react to other people's moves), a trader without a superior strategy will lose money over time. That's before commission and fees.

In the corporate world, profit is of course created by providing goods and services to the client that have a higher value than they cost to produce. A daytrader is only trying to do one better than his or hers counterparty. It's a zero sum game less commission for them, and a negative for the market and society in general. The more people engaging in non-research based trading the less real products and services are made available, and the poorer the society.

----Completely off topic, I caught the song Bloodline when partying about a week ago, and I just had to listen to a LOT OF times.

However, when a song is that good and instantly catchy, it's almost bound to fall out of favor just as quickly. Not completely unlike the current stock market rally for cyclicals, based on explosive credit in China and The Fed's sudden dovish U-turn. Well, with the best start to the stock market in 30 years behind us, you know it's not time to buy shares.

On the other hand, gold is really picking up some speed, despite s strong dollar and a stock market rally. I'm happily holding on to all my types of gold, including Nueva Granada and Gran Colombia. If you're Swedish, you really should listen to my and Anna's talk with gold and precious metals investor extraordinaire Eric Strand here.

What is a career? Why should you have one? Does it need to make “sense”?

I have a masters in finance and I’ve had three jobs in finance. Then I retired. Makes sense, right?

In my mind, I’ve only had three jobs: as a research analyst at SkandiaBanken (1994-1996), as a research analyst at Swedbank (1996-2000), and as a portfolio manager at Futuris (2000-2015). I studied for my masters in finance between 1990-1994.

In reality, however, I’ve been drawn to chemistry (my first choice for college after high school), translation, match making, programming and P2P lending (1984-1987):

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My job experiences

When I was 10-12 years old (1982-1984) I programmed my own simple computer games and charged my friends for playing it. I specifically remember a motorcycle game. I also performed a lot of unpaid programming in BASIC and machine code, which I think helped build enormous focus, logic skills and discipline.

Since around when I turned around 12, I started my own “bank”. I used to lend a dollar or two to my peers that lacked cash for candy or pastries in school. I gave my clients the choice of paying back for free the next day or at criminally steep charges for every extra day. It was very profitable. Often I charged 100% interest for a week. Today a kid doing that would probably be expelled or sued in some way.

When I was around 13-15 years I helped with my father’s accounting. I remember getting around 10$ an hour.

During our neighbor’s 40-year party (I was 12), I was put to work recording all the guests’ preferences to create the perfect seating scheme in real time. My take home pay for 4 hours of stressful work with dozens of drunk adults was a total of 4$.

As a 13-15 year old I had to do a week here and there on real jobs (obligatory job experience in school), such as a shoe department, a pizza restaurant and a machine leasing firm. Those experiences finally taught me to never, ever wanting to work in manual labor, in particular not having to stand up all day. Funny how I 20 years later had to re-learn the importance of not sitting.

I also remember some cold winters, around the same age, pushing physical ads down people’s mailboxes for a minimum pay.

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I even spent three weeks one summer in sales for personality tests in a company related to the Scientologists. I was paid a bonus for every sale, as well as a fixed weekly wage (around 300$, I think)

Later, around 1990, when I was 18) I was hired to automate that same personlity test in a pretty elaborate Excel macro for a few hundred dollars.

As an 18 year old in college (1990), I was lured by promises of extreme wealth into the romantic matching business Perfect Partners. My job was to get women to sign up for this membership based couples matching business. I was paid a commission per new active member and a monthly salary of around 1000$.

—-

Between 1990-1997 (18-25yo) I translated manuals, authored manuals, not to mention programmed database applications for my father’s company, all the while working long hours as an analyst. Some of those databases might actually still be in use in the pulp and paper industry.

My starting pay as an analyst was around 1400 USD a month before taxes. My moonlighting as a programmer and translator paid perhaps an extra 500 USD a month.

So, between 1982 and 1996, I spent a lot of time on more or less unpaid work. Then my real career took off, each year’s pay dwarfing the previous. Actually, just one single year at Futuris (2000-2015) often paid more than my entire career before Futuris.

In January 2014, however, the money wasn’t enough. I needed more intellectual challenges and consequently handed in my resignation. A year after that I spent my last paid day at Futuris on January 1, 2015.

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Since I retired when I was 41-42, I’m doing more than ever…

I run three podcasts, several newsletters, appear in podcasts, TV-shows, fintech debates, lecture, write articles and not least write on a book, not to mention juggle two dozen private equity investments. Fortunately, I spend considerably less effective time on my diverse activities than I would on a typical job.

My average over the last 10-12 weeks has been close to 25 hours a week on writing, producing and investment meetings. Add another 20 hours for dog walks and 5 hours lifting weights (plus a few more for getting there and back, and showering) and you quickly see the need for good organization not to be unnecessarily occupied all the time.

To make sure retirement feels like retirement, I’ve scheduled two full weekdays per week completely off “work”. Those days I just read books, take long walks, hang out with friends or my dog or girlfriend.

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Be careful what career you wish for

So, what’s the point of all this?

Ask yourself what kind of career you really want, and why you want that career. What is the point of your career; how is it supposed to make your life in total more meaningful and enjoyable?

Tip: Regularly take stock of what you have actually done, what you currently seem to be doing, what you actually want out of life, and whether your daily actions are bringing you closer to those targets. If not, make a change! Quit that job, start that business, leave your family — if you think it will bring more meaning.